US airlines will need to fly far more than demand dictates if they want to receive CARES Act funding for employees. But the obligations are reduced in the Department of Transportation’s (DOT) final order compared to the initial proposal. The DOT took feedback from all stakeholders into account in trying to strike an appropriate balance of service versus demand, slightly revising the rules.

Splitting big and small

The most significant change to the DOT’s requirements is a separation of large carriers and small carriers in setting the frequency of services. The DOT set the line at 10% of domestic capacity, putting American Airlines, Delta Air Lines, Southwest Airlines and United Airlines in the big carrier category. All other airlines are in the small set. The DOT also acknowledges there is a difference between destinations served just 1x daily and multiple daily flights. To that end the large carriers now have a designation of points served 25x or more weekly, not just the prior 5x threshold.

While the smaller airlines benefit significantly in the overall reduction of service required there are a number of larger airlines that also have destinations served in the 5-24x weekly range that will see their service obligation reduced as a result of the policy change.

Smaller airlines see their weekly frequencies under the Final order at about 60% of the NPRM levels; the big 4 are at 90%.

Satisfying Seasonal Shifts

The Department recognizes the significant operational and financial challenges that would be imposed on carriers operating seasonal services should they be required to operate them year-round.

While the DOT is willing to acknowledge the seasonality of schedules, something pressed for by the smaller carriers, the relief offered is limited. The Department is focused on peak seasonal schedules, not the far more dynamic operations that the ULCC model of Spirit Airlines, Frontier, Sun Country, and Allegiant operate today.

Indeed, a review of the DOT’s seasonal analysis suggests that the previously mandated obligations would be beneficial for all carriers except United Airlines. This will likely lead to a significant number of exception requests, particularly from the LCCs. That Allegiant’s obligation is larger than that of Alaska Airlines shows there are still some weaknesses in the formula.

The DOT expects these exception requests to come in, but prefers to adjudicate them individually rather than issue blanket exemptions. Indeed, the DOT declined to issue blanket exemptions for April/May that a couple airlines requested or for destinations, such as the current NYC and Seattle-area hot zones. Similarly, the DOT did not address Hawaiian Airlines‘ request for blanket exemptions for its mainland service on routes that have neither demand not economic justification.

The bits that didn’t change

Commenters on the proposal sought two other changes to the DOT’s guidelines. Some customer industry groups proposed that international routes be included. The DOT declined to accommodate that request but noted that it could do so in the future if critical supply chains break down.

Separately, smaller airports and some congressional representatives requests that the service requirements be assigned to airports rather than metro areas. The DOT declined, “The Department believes the ability of carriers to consolidate operations at a single airport serving a point is an important flexibility that furthers the objectives of the CARES Act. Requiring carriers to continue service to multiple airports serving a single point would impose undue costs on covered carriers.”

Moreover, the DOT chose to continue using its internal designation of airport groupings, not the designations used by travel agencies or other parties. While some concerns were raised about the confusion this might cause the DOT defaulted to its rules because it can control them, even if they are out of date.

Ultimately the ruling is better than it was in the initial proposal but also not relaxed enough to dramatically change the number of empty planes that are likely to fly. Alaska Airlines plans some routing adjustments with flights making two stops out from Seattle rather than just one. Other airlines might adjust similarly.

Route networks are going to look a lot different this summer and passengers should not expect much in the way of normal for some time to come.

About Seth Miller

Seth Miller has over a decade of experience covering the airline industry. With a strong focus on passenger experience, Seth also has deep knowledge of inflight connectivity and loyalty programs. He is widely respected as an unbiased commentator on the aviation industry.

He is frequently consulted on innovations in passenger experience by airlines and technology providers.